ACIT, New Delhi V. M/s. SREI Infrastructure Finance Ltd., New Delhi

ITA 1908/DEL/2012

• Counselvise Citation: 190820114 RSA 2012
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2012

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SHRI A.N. PAHUJA, AM & SHRI C.M. GARG, JM ITA NOS.1908&1909/DEL/2012 AYS: 2006-07 & 2007-08 A.C.I.T., CIRCLE-9(1), ROOM NO.163, C.R. BUILDING, NEW DELHI V/S . SREI INFRASTRUCTURE FINANCE LTD., D-2, 6 TH FLOOR, SOUTHERN PARK, SAKET PLACE, NEW DELHI [PAN : AAACS 1425 L ] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI SOUMEN ADAK & MRS. ALKA ARREN, ARS REVENUE BY SHRI RAMESH CHANDER,DR DATE OF HEARING 05-12-2012 DATE OF PRONOUNCEMENT 14-12-2012 O R D E R A.N.PAHUJA:- THESE TWO APPEALS FILED ON 25.04.2012 BY THE REVEN UE AGAINST TWO SEPARATE ORDERS DATED 30.01.2012 AND 29-02-2012 OF THE LD. CIT(A)-XII, NEW DELHI, RAISE THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) ERRED IN LAW AND FACTS OF TH E CASE, IN CANCELLING THE PENALTY OF ` `4,43,56,450/- IN THE AY 2006-07 & ` `8,99,30,100/- IN THE 2007-08 IMPOSED BY THE AO U/S 271(1)(C) OF THE ACT. 2. THE APPELLANT CRAVES TO AMEND, MODIFY, ALTER, A DD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING T HE HEARING OF THIS APPEAL. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS FOR THE AY 2006-07 ARE THAT E- RETURN DECLARING INCOME OF ` ` 2,03,13,738/- UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) AND BOOK PROFITS OF ITA NOS.1908&1909/DEL/2012 2 ` `38,95,04,834/- IN TERMS OF PROVISIONS U/S 115JB O F THE ACT, FILED ON 27.11.2006 BY THE ASSESSEE,A NON-BANKING FINANCE COMPANY IN TH E BUSINESS OF LEASING COMMERCIAL VEHICLES, INFRASTRUCTURE CONSTRUCTION MA CHINERY AND FINANCING INFRASTRUCTURAL PROJECTS, WAS REVISED ON 7.11.2007, 19.03.2008 AND FINALLY ON 31.3.2008, REFLECTING INCOME OF ` ` 1,25,92,360/- UNDER THE NORMAL PROVISIONS OF THE ACT WHILE BOOK PROFITS REMAIN UNCHANGED. AFTER PROCESSING, THE RETURN WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT. THE ASSESSMENT WAS COMPLETED ON AN INCOME OF ` ` 16,17,08,631/- UNDER THE NORMAL PROVISIONS WITH THE ADDITION OF ` `9,77,07,271/- ON ACCOUNT OF EXCESS CLAIM OF DEPRECIATION ON VEHICLES GIVEN ON LEASE; ` ` 14,04,000/- ON ACCOUNT OF INTEREST ON LOAN TO SUBSIDIARIES BESIDE DISALLOWANCE OF ` ` 5,00,05,000/- U/S 14A OF THE ACT. THE BOOK PROFITS WERE DETERMINED AT ` `67,92,04,834/- WITH THE ADDITION ON ACCOUNT OF PROVISION FOR DEFERRED TAX- ` 16,65,00,000/-,CORPORATE DIVIDEND TAX- ` 2,52,00,000/- AND TRANSFER TO SPECIAL RESERVE- ` 9,80,00,000/-. THUS, TOTAL INCOME WAS DETERMINED ON THE BOOK PROFIT OF ` `67,92,04,834/-.INTER ALIA, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR EACH OF THE AFORESAID ADDITIONS/DISALLOWANCES. 2.1 LIKEWISE, IN THE AY 2007-08 E-RETURN DECLARI NG LOSS OF ` 37,94,15,570/- UNDER THE NORMAL PROVISIONS AND BOOK PROFITS OF ` 47,54,42,043/- IN TERMS OF PROVISIONS OF SEC. 115JB OF THE ACT WAS FILED ON 29.10.2007.AFTER PROCESSING, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, DETERMINING LOSS OF ` `13,58,44,884/- UNDER THE NORMAL PROVISIONS OF THE ACT WITH THE DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION OF ` ` 14,91,54,686/-ON ACCOUNT OF VEHICLES GIVEN ON LEASE; INTEREST ON LOANS GIVEN TO SUBSIDIARIES- ` `24,84,000/- BESIDE DISALLOWANCE OF ` ` 9,19,32,000/- IN TERMS OF PROVISIONS OF SEC. 14A OF THE ACT WHILE BOOK PROFITS WERE DETERMINED AT ` ` 84,05,42,043/- WITH THE ADDITION OF ` ` 1,85,00,000/- ON ACCOUNT OF CORPORATE DIVIDEND TAX; ` ` 1 6,00,00,000/- ON ACCOUNT OF TRANSFER TO SPECIAL RESERVE AND ` ` 18,66,00,000/- ON ACCOUNT OF TRANSFER TO DEBT REDEMPTION RESERVE. THUS, TOTAL INCOME WAS DETERMINED ON THE BOOK ITA NOS.1908&1909/DEL/2012 3 PROFIT OF ` ` 84,05,42,043/- AND PENALTY PROCEEDINGS U/S 271(1)(C )OF THE ACT WERE ALSO INITIATED FOR EACH OF THE AFORESAID ADDITIONS/ DISALLOWANCES. 3. ON APPEAL, THE LD. CIT(A) UPHELD THE AFORESAID ADDITIONS/DISALLOWANCES IN THESE TWO ASSESSMENT YEA RS .AFTER THE RECEIPT OF ORDER OF THE LD. CIT(A), IN RESPONSE TO A SHOW CAUSE NOTI CE ISSUED BEFORE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, THE ASSESSEE REPL IED THAT THEY HAVE NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE P ARTICULARS THEREOF. INTER ALIA, THE ASSESSEE RELIED A NUMBER OF DECISIONS. H OWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND LEVIED A PENALT Y OF ` 4,43,56,450/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN THE AY 2006-07@100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF ` ` 19,71,11,271/- COMPRISING AS UNDER:- I) CLAIM OF EXCESS DEPRECIATION ON [IN ` ] VEHICLES GIVEN ON LEASE ` 9,77,07,271/- II) INTEREST ON LOANS GIVEN TO SUBSIDIARIES ` 14,04,000/- III) TRANSFER TO SPECIAL RESERVE WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT. ` 9,80,00,000/- 3.1 SIMILARLY, IN THE AY 2007-08, THE AO IMPOSED A PENALTY OF ` ` 8,99,30,100/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME @100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF ` ` 49,82,36,686/- COMPRISING AS UNDER:- I) CLAIM OF EXCESS DEPRECIATION ON [IN ` ] VEHICLES GIVEN ON LEASE `14,91,54,686/- II) INTEREST ON LOANS GIVEN TO SUBSIDIARIES ` 24,84,000/- III) TRANSFER TO SPECIAL RESERVE WHILE COMPUTING TH E BOOK PROFITS U/S 115JB OF THE ACT. `16,00,00, 000/- IV) TRANSFER TO DEBT REDEMPTION RESERVE WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT. 18,66,00,000/- ` ITA NOS.1908&1909/DEL/2012 4 4. ON APPEAL, THE LEARNED CIT(A) CANCELLED THE PEN ALTY IN THE AY2006- 07 ON EACH OF THE AFORESAID ADDITIONS/DISALLOWANCES , HOLDING AS UNDER:- I). LEVY OF PENALTY IN RELATION TO DISALLOWANCE OF DEPRECIATION: 7.2 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS M ADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVANT JUDICIAL PR ONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. ON PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACTS AS ENUMERATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN BE DRAWN. A. THERE IS NO DELIBERATE ATTEMPT ON THE PART OF TH E APPELLANT TO CONCEAL THE PARTICULARS OF INCOME. THE CLAIM OF HIG HER RATE OF DEPRECIATION ON MOTOR VEHICLES GIVEN ON LEASE WAS C LEARLY EVIDENT FROM THE TAX AUDIT REPORT FILED DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS. B. THE CLAIM OF HIGHER DEPRECIATION MADE BY THE ASS ESSEE WAS BASED ON VARIOUS JUDICIAL PRONOUNCEMENTS AND THE EX PLANATION OFFERED BY THE APPELLANT WAS BONAFIDE WITH RESPECT TO CLAIM OF DEPRECIATION WHICH WAS NEITHER FOUND TO BE FALSE NO R UNTRUE. THE CLAIM OF THE APPELLANT IS BONAFIDE AND NOTHING ADVE RSE HAS BEEN FOUND AGAINST THE CLAIM AS SUCH IN THE COURSE OF TH E ASSESSMENT PROCEEDINGS. ASSESSEE CASE IS ALSO COVERED BY DELHI HIGH COURT I TA NO 1582/2010 IN THE CASE OF CIT VS. BRAHMAPUTRA CONSOR TIUM LTD. DATED AUGUST 03, 2011. AFTER HEARING BOTH THE PARTI ES, THE HIGH COURT HELD THAT: ' ... THERE CANNOT BE DISPUTE ABOUT ALLOWING DEPRECIATION @ 25% ON EXCAVATORS. HOWEVER, THE CIRCUMSTANCES UNDER WHICH THE CLAIM WAS MADE AT 40%, SHOWS THAT IT WAS A GENUINE AND BONA FIDE. THE ASSESSEE HAD ACQUIRED NEW EXCAVATORS AND TIPPERS FOR A TOTAL SUM OF ` .1,78,75,260/- AND ` .6,36,88,865/- RESPECTIVELY. ALL BLOCK OF ASSETS WE RE TERMED AS 'EARTH MOVING EQUIPMENTS' AND TAKEN IN THE PROFIT AND LOSS ACCOUNT UNDER THE AFORESAID HEAD. SINCE, THE ENTIRE BLOCK CONSISTING OF EXCAVATORS AND TIPPERS WAS TAKEN UNDER THE HEAD 'EARTH MOVING EQUI PMENTS' THE EXPLANATION GIVEN BY THE ASSESSEE WAS THAT INADVERT ENTLY, IN RESPECT TO EXCAVATORS ARE THE DEPRECIATION WAS CLAIMED AT 40% INSTEAD OF 25%. THIS EXPLANATION HAS BEEN ACCEPTED AS GENUINE AND BONA F IDE BY THE TRIBUNAL ITA NOS.1908&1909/DEL/2012 5 WHICH IS THE FINAL FACT FINDING AUTHORITY. DELETION OF PENALTY ON THE GROUND OF INADVERTENT ERROR IS A FINDING OF FACT. AO DID N OT EVEN CONTRADICT THE PLEA OF THE ASSESSEE. FURTHER BY MAKING CLAIM OF DEPRECIATION AT HIGHER R ATE, WHERE THE INCOME TAX RETURN WAS AT LOSS, THE ASSESSEE DID NOT GAIN ANY MILEAGE. ON THE CONTRARY, IT WAS BETTER FOR HIM TO CLAIM DEPREC IATION @ 25% IN THIS YEAR RESULTING INTO HIGHER WRITTEN DOWN VALUE IN TH E NEXT YEAR FOR CLAIM OF DEPRECIATION OF A HIGHER AMOUNT ON HIGHER WRITTEN D OWN VALUE THEREBY REDUCING THE TAX LIABILITY. THUS, THE AO WAS NOT CO RRECT IN HOLDING THAT SUBMITTING INACCURATE CLAIM WOULD AMOUNT TO GIVING INACCURATE PARTICULARS. THUS, NO SUBSTANTIAL QUESTION OF LAW A RISES IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. THE CLAIM OF THE HIGHER DEPRECIATION BY THE APPELLA NT IS SQUARELY COVERED IN THE APPELLANTS OWN CASE FOR ASSESSMENT YEAR 1995-96, 2 000-01 AND 2001-02. THE HONBLE JURISDICTIONAL TRIBUNAL HAS DECIDED THE SIM ILAR ISSUE IN FAVOUR OF THE APPELLANT. THUS, THE SAME WAS CLAIMED BASED ON THE EARLIER YEARS PRECEDENT.' II)LEVY OF PENALTY IN RELATION TO DISALLOWANCE OF N OTIONAL INTEREST : 8.3 I HAVE CAREFULLY GONE THROUGH THE SUBMISSION S MADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVA NT JUDICIAL PRONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. ON PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACTS AS ENUMERATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN BE DRAWN. A. THE APPELLANT HAD OWNED FUNDS OF ` .41,052 LACS AS AT 31-03-2006 AND DURING THE YEAR, PROFIT OF ` .4,842 LACS (PAT) HAS BEEN EARNED WHICH IS SUFFICIENT TO FINANCE INTEREST FREE LOAN O F ` .117 LACS ADVANCED TO THE SISTER CONCERNS. THE SAME IS CLEARL Y EVIDENT FROM THE AUDITED ACCOUNTS FOR THE YEAR ENDED F.Y. 2005-0 6. B. THE CLAIM OF THE APPELLANT WAS BONAFIDE BASED O N VARIOUS JURIDICAL PRONOUNCEMENTS AVAILABLE AT THE TIME OF FILING OF R ETURN. FURTHER IT IS A DEBATABLE ISSUE AS CONTRARY JUDGMENTS ARE AVAILAB LE AND DOES NOT CALL FOR IMPOSITION OF PENALTY. C. THE ABOVE FACTS AS NARRATED BY THE AR OF THE AP PELLANT IS CLEARLY VISIBLE FROM THE BALANCE SHEET AND THE AUDITED ACCO UNTS OF THE COMPANY WHICH LEAVES BEYOND DOUBT THE FACT THAT THE APPELLANT HAD ITA NOS.1908&1909/DEL/2012 6 SUFFICIENT OWN FUNDS FOR ADVANCING SUCH FUNDS TO IT S SUBSIDIARY COMPANY. D. SINCE ALL THE FACTS RELATING TO THE SAID ISSUE WERE ALREADY DISCLOSED AND THE APPELLANT HAD AN ADEQUATE BASIS, THUS THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS IN THE RETURN OF INCOME. 8.4 FURTHER, SIMILAR ISSUE HAS BEEN DECIDED IN FAV OUR OF THE APPELLANT IN A Y 2008-09 IN APPEAL NO.11/10-11 BY ME. THUS, KEEPING IN MIND THAT, ALL THE FACTS RELATING TO THE ISSUE WERE DISCLOSED BEFORE ASSESSING OFFICER, THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS BY THE APPELLANT. THE DECISION OF HON'BLE APEX COURT IN TH E CASE OF CIT - VS.- RELIANCE-PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) IS APPLICABLE IN THE PRESENT CASE. SINCE THERE WAS NEI THER ANY CONCEALMENT OF INCOME NOR ANY INACCURATE PARTICULAR S HAS BEEN FURNISHED BY THE APPELLANT, THE BASIC CONDITIONS FO R LEVY OF PENALTY IS NOT SATISFIED. THE PENALTY IMPOSED IS THUS CANCELLE D. III)LEVY OF PENALTY IN RELATION TO ADDITION OF SPE CIAL RESERVE WHILE COMPUTING BOOK PROFITS : 9.2 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVANT JUDICIA L PRONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. ON PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACTS AS ENUMERATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN BE DRAW N. A. DURING THE YEAR UNDER CONSIDERATION, THE APPELL ANT HAS TRANSFERRED A SUM OF ` .9,80,00,000/- TO 'SPECIAL RESERVE' AS PER THE PROV ISIONS OF SEC. 45IC OF THE RBI ACT BEING 20% OF THE PROFIT S. THE SAID TRANSFER WAS MADE AS PER THE GUIDELINES LAID DOWN B Y RBI AND WAS STATUTORY IN NATURE. B. THE APPELLANT WAS UNDER A BONAFIDE RELIEF THAT THE AMOUNT TRANSFERRED TO SPECIAL RESERVE AS PER RBI ACT IS NO T TO BE ADDED BACK TO THE BOOKS PROFIT U/S 115JB AND THUS THE SAM E WAS NOT ADDED BACK. THUS, THERE HAS BEEN NEITHER CONCEALMEN T OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE APPELLANT HAD MADE COMPLETE DISCLOSURE OF THE SAID FACT IN TH E COURSE OF THE ITA NOS.1908&1909/DEL/2012 7 ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. FURTH ER, THE AFORESAID FACT WAS CLEARLY EVIDENT FROM AUDITED ACC OUNTS. 9.3 FURTHER, SIMILAR ISSUE HAS BEEN DECIDED IN FAV OUR OF THE APPELLANT IN A Y 2008-09 IN APPEAL NO. 11/10-11 BY ME. THUS, KEE PING IN MIND THAT, ALL THE FACTS RELATING TO THE ISSUE WERE DISC LOSED BEFORE A.O., THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY THE APPELLANT. THE DECISION OF HON'B LE APEX COURT IN THE CASE OF CIT -VS.- RELIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) IS APPLICABLE IN THE PRESENT CASE. SIN CE THERE WAS NEITHER ANY CONCEALMENT OF INCOME NOR ANY INACCURAT E PARTICULARS HAS BEEN FURNISHED BY THE APPELLANT, THE BASIC COND ITIONS FOR LEVY OF PENALTY IS NOT SATISFIED. THE PENALTY IMPOSED IS TH US CANCELLED. IV)LEVY OF PENALTY DUE TO DETERMINATION OF INCOME U /S 115JB OF THE ACT: 10. AS REGARD GROUND NO.8, THE QUESTION AS TO WHE THER PENALTY CAN BE IMPOSED IN RESPECT OF THE ASSESSMENT OF TOTAL INCOM E UNDER THE NORMAL PROVISIONS OF THE ACT WHEN ULTIMATELY THE TO TAL INCOME IS DETERMINED U/S. 115JB OF THE ACT, RELIANCE WAS PLAC ED ON THE DECISION HON'BLE MUMBAI ITAT IN THE CASE OF RUCHI S TRIPS & ALLOYS LIMITED VS. DCIT (ITA NO. 6940/MUM/2008) WHEREIN IT WAS HELD THAT THE CONCEALMENT OF INCOME HAD ITS REPERCUSSIONS ONL Y WHEN THE ASSESSMENT WAS DONE UNDER THE NORMAL PROCEDURE. I F THE ASSESSMENT AS PER THE NORMAL PROCEDURE WAS NOT ACTE D UPON AND IT WAS THE DEEMED INCOME ASSESSED U/S 115JB WHICH BECA ME THE BASIS OF ASSESSMENT, THE CONCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRRELEVANT. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF DCIT VS. USHDEV INTERNATIONAL LTD. (2011) 50 DTR 283 (MU M.) AND M/S. PARAMOUNT MINERALS AND CHEMICALS LIMITED VS. DCIT ( ITA NO. 4714/MUM/2009). 10.1 IN THE PRESENT CASE THE APPELLANT HAD TO PAY TAX UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. HOWEVER, TH E A.O. HAS LEVIED PENALTY AMOUNTING TO ` .4,43,56,450/- ON ADDITIONS AND/OR DISALLOWANCES MADE UNDER THE NORMAL PROVISIONS OF T HE ACT AS WELL AS U/S 115JB OF THE ACT. FURTHER, PENALTY U/S 27L(L (C) TO THE TUNE OF RS.3,33,60853/- WAS LEVIED ON DISALLOWANCE MADE UND ER THE NORMAL PROVISIONS OF THE ACT, HOWEVER THERE WAS NO CHANGE IN TAX LIABILITY ON ACCOUNT OF THE AFORESAID DISALLOWANCE AS THE DISALLOWANCE WAS MADE IN NORMAL COMPUTATION OF INCO ME. SINCE, THERE WAS NO IMPACT ON TAX LIABILITY ON ACCOUNT OF DISALLOWANCES UNDER THE NORMAL PROVISIONS OF THE ACT, NO TAX IS S OUGHT TO BE EVADED. ITA NOS.1908&1909/DEL/2012 8 THE ASSESSEE HAS ALSO RELIED ON CIT VS. NALWA SONS INVESTMENTS LTD. (HC) (2010) 194 TAXMAN 387 (DELHI):- ' ... SECTION 271(1)(C) READ WITH SECTION 115JB, OF THE IT ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - ASSESSMENT YE AR 2001-02 - ASSESSEE FILED ITS RETURN OF INCOME DECLARING CERTA IN LOSS - WHILE MAKING ASSESSMENT, ASSESSING OFFICER MADE DISALLOWA NCES ON ACCOUNT OF PF CONTRIBUTION MADE BELATEDLY, DEDUCTIO N CLAIMED U/S. 80HHE AND DEPRECIATION CLAIMED ON MACHINERY PURCHAS ED ON LAST DAY OF YEAR. HOWEVER, AS INCOME SO COMPUTED UNDER NORMAL PROCEDURE WAS LESS THAN INCOME DETERMINED U/S. 115J B, ASSESSEE WAS ASSESSED U/S. 115JB - THEREAFTER, ASSESSING IMP OSED PENALTY U/S. 271 (1)(C) IN RESPECT OF AFORESAID THREE ADDIT IONS HOLDING THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME - WHETHER, THOUGH THERE WAS CONCEALMENT, YET THAT WOULD HAVE R EPERCUSSIONS ONLY WHEN ASSESSMENT WOULD HAVE BEEN DONE UNDER NOR MAL PROCEDURE - HELD, YES - WHETHER WHEN ASSESSMENT WAS MADE ON INCOME COMPUTED U/S. 115JB AND TAX HAD BEEN PAID ON INCOME SO COMPUTED, AFORESAID CONCEALMENT DID NOT LEAD TO TAX EVASION AND, THEREFORE, NO PENALTY COULD HAVE BEEN IMPOSED ON AS SESSEE - HELD, YES. FINDING 10.2 THE LIGHT OF AFORESAID DISCUSSION, I FIND THA T THE ISSUE IS COVERED BY THE AFORESAID DECISION. SINCE, THERE WAS NO CHANGE IN THE TAX LIABILITY ON ACCOUNT OF THE DISALLOWANCE MADE UNDER NORMAL PROVISIONS OF THE ACT, THE PENALTY, EVEN OTHERWISE OUGHT NOT TO HAVE BEEN IMPOSED ON THE DISALLOWANCES MADE UNDER THE NO RMAL PROVISIONS OF THE ACT. HOWEVER, SINCE THE INDIVIDU AL GROUNDS ARE ALLOWED ABOVE, NO FURTHER RELIEF IS GRANTED IN RESP ECT OF THIS GROUND. 5. SIMILARLY, IN THE AY 2007-08, THE LD.CIT(A) CAN CELLED THE PENALTY ON EACH OF THE AFORESAID ADDITIONS/DISALLOWANCES, HOLD ING AS UNDER:- I )LEVY OF PENALTY IN RELATION TO DISALLOWANCE OF DEP RECIATION: 7.2 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVANT JUDICIA L PRONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. ON PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACTS AS ENUMERATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN BE DRAW N. ITA NOS.1908&1909/DEL/2012 9 A. THERE IS NO DELIBERATE ATTEMPT ON THE PART OF TH E APPELLANT TO CONCEAL THE PARTICULARS OF INCOME. THE CLAIM OF HIG HER RATE OF DEPRECIATION ON MOTOR VEHICLES GIVEN ON LEASE WAS C LEARLY EVIDENT FROM THE TAX AUDIT REPORT FILED DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS. B. THE CLAIM OF HIGHER DEPRECIATION MADE BY THE ASS ESSEE WAS BASED ON VARIOUS JUDICIAL PRONOUNCEMENTS AND THE EXPLANAT ION OFFERED BY THE APPELLANT WAS BONAFIDE WITH RESPECT TO CLAIM OF DEPRECIATION WHICH WAS NEITHER FOUND TO BE FALSE NOR UNTRUE. THE CLAIM OF THE APPELLANT IS BONAFIDE AND NOTHING ADVERSE HAS BEEN FOUND AGAINST THE CLAIM AS SUCH IN THE COURSE OF THE ASSESSMENT P ROCEEDINGS. ASSESSEE CASE IS ALSO COVERED BY DELHI HIGH COURT I TA NO 1582/2010 IN THE CASE OF CIT VS. BRAHMAPUTRA CONSOR TIUM LTD. DATED AUGUST 03, 2011. AFTER HEARING BOTH THE PARTI ES, THE HIGH COURT HELD THAT: ' ... THERE CANNOT BE DISPUTE ABOUT ALLOWING DEPREC IATION @ 25% ON EXCAVATORS. HOWEVER, THE CIRCUMSTANCES UNDER WHICH THE CLAIM WAS MADE AT 40%, SHOWS THAT IT WAS A GENUINE AND BONA FIDE. THE ASSESSEE HAD ACQUIRED NEW EXCAVATORS AND TIPPERS FOR A TOTAL SUM OF ` .1,78,75,260/- AND ` .6,36,88,865/- RESPECTIVELY. ALL BLOCK OF ASSETS WE RE TERMED AS 'EARTH MOVING EQUIPMENTS' AND TAKEN IN THE PROFIT AND LOSS ACCOUNT UNDER THE AFORESAID HEAD. SINCE, THE ENTIRE BLOCK CONSISTING OF EXCAVATORS AND TIPPERS WAS TAKEN UNDER THE HEAD 'EARTH MOVING EQUI PMENTS' THE EXPLANATION GIVEN BY THE ASSESSEE WAS THAT INADVERT ENTLY, IN RESPECT TO EXCAVATORS ARE THE DEPRECIATION WAS CLAIMED AT 40% INSTEAD OF 25%. THIS EXPLANATION HAS BEEN ACCEPTED AS GENUINE AND BONA F IDE BY THE TRIBUNAL WHICH IS THE FINAL FACT FINDING AUTHORITY. DELETION OF PENALTY ON THE GROUND OF INADVERTENT ERROR IS A FINDING OF FACT. AO DID N OT EVEN CONTRADICT THE PLEA OF THE ASSESSEE. FURTHER BY MAKING CLAIM OF DEPRECIATION AT HIGHER R ATE, WHERE THE INCOME TAX RETURN WAS AT LOSS, THE ASSESSEE DID NOT GAIN A NY MILEAGE. ON THE CONTRARY, IT WAS BETTER FOR HIM TO CLAIM DEPRECIATI ON @ 25% IN THIS YEAR RESULTING INTO HIGHER WRITTEN DOWN VALUE IN THE NEX T YEAR FOR CLAIM OF DEPRECIATION OF A HIGHER AMOUNT ON HIGHER WRITTEN D OWN VALUE THEREBY REDUCING THE TAX LIABILITY. THUS, THE AO WAS NOT CO RRECT IN HOLDING THAT SUBMITTING INACCURATE CLAIM WOULD AMOUNT TO GIVING INACCURATE PARTICULARS. THUS, NO SUBSTANTIAL QUESTION OF LAW A RISES IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. ITA NOS.1908&1909/DEL/2012 10 7.3 THUS, KEEPING IN MIND THAT, ALL THE FACTS RELA TING TO THE ISSUE WERE DISCLOSED BEFORE ASSESSING OFFICER, THEE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS BY THE APPELLANT. THE DECISION OF HONBLE APEX COURT IN T HE CASE OF CIT- VS.-RELIANE PETROPRODUCTS (P) LTD. (2010) 322 ITR 1 58 (SC) IS APPLICABLE IN THE PRESENT CASE. SINCE THERE WAS NE ITHER ANY CONCEALMENT OF INCOME NOR ANY INACCURATE PARTICULAR S HAS BEEN FURNISHED BY THE APPELLANT, THE BASIC CONDITIONS FO R LEVY OF PENALTY IS NOT SATISFIED. THE PENALTY IMPOSED IS THUS CANCELL ED. II)LEVY OF PENALTY IN RELATION TO DISALLOWANCE OF I NTEREST: 8.3 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVA NT JUDICIAL PRONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. ON PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACT S AS ENUMERATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN BE DRAWN. A. THE APPELLANT HAD HAS OWNED FUNDS OF ` .47,703 LACS AS AT 31-03- 2007 AND DURING THE YEAR, PROFIT OF ` .7,925 LACS (PAT) HAS BEEN EARNED WHICH IS SUFFICIENT TO FINANCE INTEREST FREE LOAN OF ` .207 LACS ADVANCED TO THE SISTER CONCERNS. THE SAME IS CLEARL Y EVIDENT FROM THE AUDITED ACCOUNTS FOR THE YEAR ENDED F.Y. 2006-0 7. B. THE CLAIM OF THE APPELLANT WAS BONAFIDE BASED O N VARIOUS JURIDICAL PRONOUNCEMENTS AVAILABLE AT THE TIME OF FILING OF R ETURN. C. THE ABOVE FACTS AS NARRATED BY THE AR OF THE AP PELLANT IS CLEARLY VISIBLE FROM THE BALANCE SHEET AND THE AUDITED ACCO UNTS OF THE COMPANY WHICH LEAVES BEYOND DOUBT THE FACT THAT THE APPELLANT HAD SUFFICIENT OWN FUNDS FOR ADVANCING SUCH FUNDS TO IT S SUBSIDIARY COMPANY. D. SINCE ALL THE FACTS RELATING TO THE SAID ISSUE WERE ALREADY DISCLOSED AND THE APPELLANT HAD AN ADEQUATE BASIS, THUS THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS IN THE RETURN OF INCOME. 8.4 FURTHER, SIMILAR ISSUE HAS BEEN DECIDED IN FAV OUR OF THE APPELLANT IN A Y 2008-09 IN APPEAL NO.11/10-11 BY ME. THUS, KEEP ING IN MIND THAT, ALL THE FACTS RELATING TO THE ISSUE WERE DISC LOSED BEFORE ASSESSING OFFICER, THERE WAS NO CONCEALMENT OF INCO ME OR FURNISHING OF INACCURATE PARTICULARS BY THE APPELLA NT. THE DECISION OF ITA NOS.1908&1909/DEL/2012 11 HON'BLE APEX COURT IN THE CASE OF CIT -VS.- RELIANC E-PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) IS APPLICABLE IN T HE PRESENT CASE. SINCE THERE WAS NEITHER ANY CONCEALMENT OF INCOME N OR ANY INACCURATE PARTICULARS HAS BEEN FURNISHED BY THE AP PELLANT, THE BASIC CONDITIONS FOR LEVY OF PENALTY IS NOT SATISFI ED. THE PENALTY IMPOSED IS THUS CANCELLED. III)LEVY OF PENALTY IN RELATION TO ADDITION OF SPEC IAL RESERVE WHILE COMPUTING BOOK PROFITS: 9.2 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVANT JUDICIA L PRONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. ON PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACTS AS ENUMERATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN BE DRAW N. A. DURING THE YEAR UNDER CONSIDERATION, THE APPELL ANT HAS TRANSFERRED A SUM OF ` .16,00,00,000/- TO 'SPECIAL RESERVE' AS PER THE PROVISIONS OF SEC. 45IC OF THE RBI ACT BEING 20% OF THE PROFITS. THE SAID TRANSFER WAS MADE AS PER THE GUIDELINES LAID D OWN BY RBI AND WAS STATUTORY IN NATURE. B. THE APPELLANT WAS UNDER A BONAFIDE RELIEF THAT THE AMOUNT TRANSFERRED TO SPECIAL RESERVE AS PER RBI ACT IS NO T TO BE ADDED BACK TO THE BOOKS PROFIT U/S 115JB AND THUS THE SAM E WAS NOT ADDED BACK. THUS, THERE HAS BEEN NEITHER CONCEALMEN T OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE APPELLANT HAD MADE COMPLETE DISCLOSURE OF THE SAID FACT IN TH E COURSE OF THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. FURTH ER, THE AFORESAID FACT WAS CLEARLY EVIDENT FROM AUDITED ACC OUNTS. 9.3 FURTHER, SIMILAR ISSUE HAS BEEN DECIDED IN FAVO UR OF THE APPELLANT IN A Y 2008-09 IN APPEAL NO. 11/10-11 BY ME. THUS, KEE PING IN MIND THAT, ALL THE FACTS RELATING TO THE ISSUE WERE DISC LOSED BEFORE A.O., THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY THE APPELLANT. THE DECISION OF HON'B LE APEX COURT IN THE CASE OF CIT -VS.- RELIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) IS APPLICABLE IN THE PRESENT CASE. SIN CE THERE WAS NEITHER ANY CONCEALMENT OF INCOME NOR ANY INACCURAT E PARTICULARS HAS BEEN FURNISHED BY THE APPELLANT, THE BASIC COND ITIONS FOR LEVY OF PENALTY IS NOT SATISFIED. THE PENALTY IMPOSED IS TH US CANCELLED. ITA NOS.1908&1909/DEL/2012 12 IV)LEVY OF PENALTY IN RELATION TO ADDITION OF DEBEN TURE REDEMPTION RESERVE WHILE COMPUTING BOOK PROFITS: 10.2 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND GONE THROUGH THE RELEVANT JUDICIA L PRONOUNCEMENTS CITED BY THE AR OF THE APPELLANT. O N PERUSAL OF THE JUDICIAL PRONOUNCEMENTS AND THE FACTS AS ENUMER ATED BY THE AR OF THE APPELLANT THE FOLLOWING CONCLUSIONS CAN B E DRAWN. A. DURING THE YEAR UNDER CONSIDERATION, THE APPELLA NT HAS TRANSFERRED A SUM OF ` ` 18,66,00,000/- TO DEBENTURE REDEMPTION RESERVE AN D CONTENDED THAT THE SAME IS NEITHER A RESERVE NOR A PROVISION FOR UNASCERTAINED LIABILITY SO AS TO ATTRACT THE CLAUSE (B) OR (C) OF EXPLANATION 1 TO SECTION 115JB(2). B. ANY AMOUNT TRANSFERRED TO ANY RESERVE CANNOT BE TREATED AS A RESERVE PARTICULARLY WHEN THE AMOUNT TRANSFERRED IS NOT IN EXCESS OF AMOUNT WHICH HAD TO BE PAID FOR THE SPECIAL PURPOSE . THE ABOVE VIEW HAS ALSO BEEN HELD BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF NATIONAL RAYON CORPORATION LTD. (SUPRA) . C. ON PERUSAL OF THE MEANING OF THE TERM PROVISION AND RESERVE AS DEFINED IN CLAUSE 7(1) OF PART III, SCHEDULE VI OF THE COMPANIES ACT, 1956 OF THE COMPANIES ACT, IT CAN BE SAID THAT THE SAID TRANSFER CAN BE TERMED AS A PROVISION AND NOT A RESERVE, EVEN TH OUGH IT IS REFLECTED IN THE AUDITED ACCOUNTS AS DEBENTURE RED EMPTION RESERVE. THUS, THE SAME IS NOT COVERED BY THE PRO VISIONS OF CLAUSE (B) OF EXPLANATION TO SECTION 115JB. 10.3 AS ALL THE DISCLOSURES RELATING THE AMOUNT SO TRANSFERRED TO THE RESERVES HAVE ALREADY BEEN MADE IN THE AUDITED ACCO UNTS ITSELF AND THE APPELLANT HAS MADE A CLAIM ON THE BONAFIDE BELI EF THAT THE SAME IS ALLOWABLE. THUS, KEEPING IN MIND THAT, ALL THE FACTS RELATING TO THE ISSUE WERE DISCLOSED BEFORE A.O., THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS B Y THE APPELLANT. THE DECISION OF HON'BLE APEX COURT IN THE CASE OF C IT -VS.- RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) IS APPLICABLE IN THE PRESENT CASE. SINCE THERE WAS NEI THER ANY CONCEALMENT OF INCOME NOR ANY INACCURATE PARTICULAR S HAVE BEEN FURNISHED BY THE APPELLANT, THE BASIC CONDITIONS FO R LEVY OF PENALTY IS NOT SATISFIED. THE PENALTY IMPOSED IS THUS CANCELLE D. ITA NOS.1908&1909/DEL/2012 13 V)LEVY OF PENALTY DUE TO DETERMINATION OF INCOME U/ S 115JB OF THE ACT: 11.1 IN THE PRESENT CASE THE APPELLANT HAD TO PAY TAX UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. HOWEVER, TH E A.O HAS LEVIED PENALTY AMOUNTING TO RS.8,99,30,I00/- ON ADDITIONS ANDLOR DISALLOWANCES MADE UNDER THE NORMAL PROVISIONS OF T HE ACT AS WELL AS U/S 115JB OF THE ACT. FURTHER, PENALTY 271(L)(C) TO THE TUNE OF RS.5,I0,41,5801- WAS LEVIED 0 DISALLOWANCE MADE UND ER THE NORMAL PROVISIONS OF THE ACT, HOWEVER THERE WAS NO CHANGE IN TAX LIABILITY ON ACCOUNT OF THE AFORESAID DISALLOWANCE AS THE DIS ALLOWANCE WAS MADE IN NORMAL COMPUTATION OF INCOME. SINCE, THERE WAS NO IMPACT ON TAX LIABILITY ON ACCOUNT OF DISALLOWANCES UNDER THE NORMAL PROVISIONS OF THE ACT, NO TAX IS SOUGHT TO BE EVADE D. THE ASSESSEE IS ALSO COVERED BY CIT VS. NALWA SONS INVESTMENTS LTD. (HC) (2010) 194 TAXMAN 387 (DELHI):- ' ... SECTION 271(1)(C) READ WITH SECTION 115JB, OF THE IT ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - ASSESSMENT YE AR 2001-02 - ASSESSEE FILED ITS RETURN OF INCOME DECLARING CERTA IN LOSS - WHILE MAKING ASSESSMENT, ASSESSING OFFICER MADE DISALLOWA NCES ON ACCOUNT OF PF CONTRIBUTION MADE BELATEDLY, DEDUCTIO N CLAIMED U/S. 80HHC AND DEPRECIATION CLAIMED ON MACHINERY PURCHAS ED ON LAST DAY OF YEAR -HOWEVER, AS INCOME SO COMPUTED UNDER N ORMAL PROCEDURE WAS LESS THAN INCOME DETERMINED U/S. 115J B, ASSESSEE WAS ASSESSED U/S. 115JB - THEREAFTER, ASSESSING OFF ICER IMPOSED PENALTY U/S. 271(1)(C) IN RESPECT OF AFORESAID THRE E ADDITIONS HOLDING THAT ASSESSEE HAD FURNISHED INACCURATE PART ICULARS OF INCOME - WHETHER, THOUGH THERE WAS CONCEALMENT, YET THAT WOULD HAVE REPERCUSSIONS ONLY WHEN ASSESSMENT WOULD HAVE BEEN DONE UNDER NORMAL PROCEDURE - HELD, YES - WHETHER WHEN A SSESSMENT WAS MADE ON INCOME COMPUTED U/S. 115JB AND TAX HAD BEEN PAID ON INCOME SO COMPUTED, AFORESAID CONCEALMENT DID NO T LEAD TO TAX EVASION AND, THEREFORE, NO PENALTY COULD HAVE BEEN IMPOSED ON ASSESSEE - HELD, YES. 11.2 THUS, IN THE LIGHT OF AFORESAID DISCUSSION, I FIND THAT THE ISSUE IS COVERED BY THE AFORESAID DECISION. SINCE, THERE WAS NO CHANGE IN THE TAX LIABILITY ON ACCOUNT OF THE DISALLOWANCE MA DE UNDER NORMAL PROVISIONS OF THE ACT, THE PENALTY, EVEN OTHERWISE OUGHT NOT TO HAVE BEEN IMPOSED ON THE DISALLOWANCES MADE UNDER THE NO RMAL PROVISIONS OF THE ACT. HOWEVER, SINCE THE INDIVIDUA L GROUNDS ARE ALLOWED ABOVE, NO FURTHER RELIEF IS GRANTED IN RESP ECT OF THIS GROUND. ITA NOS.1908&1909/DEL/2012 14 6. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED TH E ORDER OF THE AO, LEVYING PENALTY, CONTENDING, INTER ALIA, THAT PROVISIONS OF SECTION 115JB OF THE ACT ARE A SELF CONTAINED CODE AND THE ASSESSEE HAVING NOT OFF ERED TO TAX THE AMOUNT TRANSFERRED TO SPECIAL RESERVE OR DEBENTURE REDEMPT ION RESERVE IN THE COMPUTATION OF BOOK PROFITS, FURNISHED INACCURATE P ARTICULARS OF INCOME, ESPECIALLY WHEN THE ASSESSEE ITSELF HAD BEEN ADDING BACK THE AMOUNT TRANSFERRED TO SPECIAL RESERVE IN COMPUTING THE BOO K PROFITS IN THE EARLIER YEARS. AS REGARDS RELIANCE ON THE JUDGMENT OF HONBLE DELH I HIGH COURT IN CIT VS. NALWA SONS INVESTMENT LTD., 327 ITR 543,THE LD. DR IN HIS WRITTEN SUBMISSIONS PLEADED THAT THE INCOME TAX ACT NOWHERE PROVIDED T HAT IF PROVISIONS U/ S 1L5JB ARE RESORTED TO, MANDATORY PROVISIONS OF THE CHAPTE R IV WILL GET SUSPENDED. EVEN WHEN TAX IS COMPUTED U/ S 115JB, AO HAS TO COMPUTE INCOME UNDER NORMAL PROVISIONS OF CHAPTER IV ALSO WHICH IS A MUST ONLY BECAUSE IT IS HERE THAT THE AO HAS TO GIVE EFFECT TO VARIOUS OTHER CLAIMS FOR DEDU CTIONS/ EXEMPTIONS OF THE ASSESSEE E.G. SET OFF OF BROUGHT FORWARD LOSSES, DE DUCTIONS U/ C VIA ETC. HAD THE HIGH COURT BEEN EXPLAINED THE CORRECT MACHINERY SCH EME OF THE INCOME TAX ACT, THAT EVEN AFTER COMPUTATION U/ S 1L5JB, AO IS DUTY BOUND TO COMPUTE INCOME OR LOSS UNDER THE NORMAL PROVISIONS OF THE ACT, ITS DE CISION WOULD HAVE BEEN DIFFERENT. BESIDES DEEMING FICTION OF THE PROVISIO NS OF SECTION 1L5JB COULD NOT EXTEND BEYOND CALCULATION OF TAX PAYABLE BY THE ASS ESSEE. ACCORDINGLY, THE LD. DR SUBMITTED THAT PENALTY PROCEEDINGS BEING INDEPEN DENT OF THE ASSESSMENT PROCEEDINGS, PROVISIONS OF SECTION 1L5JB WHICH WER E ON COMPUTATION OF TAX COULD NOT BE EXTENDED TO THESE PROCEEDINGS. BESIDES, EXTENDING SCOPE OF APPLICATION OF 1L5JB TO PENALTY PROCEEDINGS WOULD MAKE PROVISIONS OF CLAUSE (A) OF THE EXPLANATION (4) OF SECTION 271(1) (C) OF THE ACT OT IOSE /REDUNDANT. THE PROVISIONS OF SECTION 115JB ARE ONLY FOR CALCULATING INCOME TA X AND NOT FOR CALCULATING PENALTY. THERE IS NO DOUBT THAT EVEN IF THERE IS NO POSITIVE INCOME, PENALTY CAN STILL BE CALCULATED BY DEEMING THE ADDITION OR DISA LLOWANCE ITSELF TO BE THE INCOME. EXPLANATION 4 DOES NOT EVEN IMPLIEDLY PROVIDE FOR A TTRACTING THE DEEMING FICTION OF ITA NOS.1908&1909/DEL/2012 15 THE PROVISIONS OF SECTION 115JB. ACCORDINGLY, THE L D. DR PRAYED TO ALLOW THE APPEAL OF THE REVENUE. WHILE REFERRING TO DECISIONS IN TRINITY TOUCH (P.) LTD. V. INCOME-TAX OFFICER,132 ITD 88 (DELHI); & CHADHA SUG ARS (P.) LTD.VS. ACIT,135 ITD 42 (DELHI), THE LD. DR ARGUED THAT CLAIM BEING NOT BONAFIDE LEVY OF PENALTY WAS JUSTIFIED. INTER ALIA, THE LD. DR RELIED UPON D ECISIONS IN CIT VS. ZOOM COMMUNICATION (P) LTD.,( 2010) 191 TAXMAN 179 (DELH I); CIT VS. ALKESH K. PATEL(2010) 195 TAXMAN 338 (BOM.);ACIT VS. SURINDER LAL CHOPRA(2010) 2 CTR (TRIB.) 790 (DELHI); CIT VS. HARPARSHAD & CO. LTD. (2010) 328 ITR 53 (DELHI);CHADHA SUGARS (P) LTD. VS. ACIT, CIRCLE 3(1 ), NEW DELHI(2012) 18 TAXMANN.COM244(DELHI) & ACIT VS. DINESH GOEL. (2011 ) 16 TAXMANN.COM 11 (DELHI) 7. ON THE OTHER HAND, THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LD. CIT(A) WHILE CONTENDING THA T PENALTY IS NOT LEVIABLE ON ADDITIONS MADE TO BOOK PROFITS WHEN APPEAL IS ADMIT TED BY THE HONBLE HIGH COURT IN THEIR CASE ON THE ISSUE OF ADDITIONS ON AC COUNT OF TRANSFER TO SPECIAL RESERVE AND DEBT REDEMPTION RESERVE IN I.T.A. NOS.3 71 & 372 OF 2012 VIDE ORDER DATED 29 TH AUGUST, 2012 READ WITH ORDER DATED 6 TH NOVEMBER, 2012. IN THIS CONNECTION, THE LD. AR REFERRED TO DECISIONS IN CI T VS. LIQUID INVESTMENT & TRADING CO. IN I.T.A. NO.240/2009)(DEL.);ROGER ENTE RPRISES (P) LTD. VS. DCIT (I.T.A. NO.567,568 & 569/DEL./06);HERO HONDA MOTORS LTD. VS. DCIT (2011 63 DTR 53 (DEL);NAYAN BUILDERS AND DEVELOPERS PVT. LTD . VS. I.T.O. (2379/MUM/2009); RUPAM MERCANTILES LTD. (IN LIQUIDA TION) & ORS. VS. DCIT (2004) 85 TTJ 609 (AHD-TM) & ACIT VS. VIJAY KUMAR J INDAL (I.T.A. NO.4237/D/09).THE LD. AR FURTHER SUBMITTED THAT SIN CE THE ASSESSEE NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS THEREOF WHILE QUANTUM ADDITIONS IN DETERMINING INCOME UNDER THE NORMAL PROVISIONS OF THE ACT HAVE BEEN RESTORED BACK TO THE FILE OF AO B Y THE ITAT VIDE THEIR ORDER DATED 23.02.2012 IN I.T.A. NOS.617 AND 618/DEL./201 0, NO PENALTY COULD BE IMPOSED IN RELATION TO THE SAID DISALLOWANCES. IN T HIS CONNECTION, THE LD. AR REFERRED TO DECISION IN JCIT VS. M/S GHAZIABAD URBA N CO-OPERATIVE BANK LTD. IN ITA NOS.1908&1909/DEL/2012 16 ITA NO.3992/DEL./2011. SINCE THE CLAIMS MADE BY THE ASSESSEE WERE BONAFIDE, RELYING UPON DECISIONS IN CIT VS. RELIANCE PETROPRO DUCTS (P) LTD. 328 ITR 158 (SC); CIT VS. MAHANAGAR TELEPHONES 63 DTR87 (DELHI) ; CIT VS. SHYAM TEX INTERNATIONAL LTD. 48 DTR 19(DELHI); &CIT VS. DHARA M PAL PREM CHAND LTD., 329 ITR 572(DELHI), THE LD. AR ARGUED THAT PENALTY COUL D NOT BE IMPOSED. THE LD. AR ALSO PLEADED THAT DECISION IN UOI VS. DHARMENDRA TE XTILE PROCESSORS & OTHERS (2008) 306 ITR 277 (SC) IS NOT APPLICABLE IN VIEW O F DECISIONS IN CIT VS. HARYANA WAREHOUSING CORPORATION (2009) 314 ITR 215 (P&H);UOI VS. RAJASTHAN SPINNING & WEAVING MILLS (2009) 180 TAXMAN 609 (SC) .THE RATIO OF THE JUDGMENT IN DHARMENDRA TEXTILES (SUPRA) HAS BEEN EX PLAINED BY THE HONBLE APEX COURT IN RELIANCE PETROPRODUCTS (SUPRA) BY OB SERVING THAT THE SAID DECISION IS AN AUTHORITY ONLY FOR THE PROPOSITION THAT ELEME NT OF MENS REA STANDS EXCLUDED FROM THE SCOPE OF THE PROVISIONS OF SECTION 271(1)( C )AND IT IS ONLY TO THIS EXTENT THE DECISION IN THE CASE OF DILIP N. SHROFF VS. JCI T (2007) 291 ITR 519 (SC) STOOD OVERRULED. FURTHER, IN THE CASE OF CIT VS. S IDHARTHA ENTERPRISES (2010) 322 ITR 80 (P&H), IT WAS HELD THAT THE DECISION OF SUPREME COURT IN DHARMENDRA TEXTILE (SUPRA) CANNOT BE READ AS LAY DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. THE LD. AR CONTENDED THAT ISSUE IS SQUARELY COVERED BY DECISION IN CIT VS. NALWA SONS INVESTMENTS LTD.,327 ITR 543(DELHI) AND SLP AGAINST THE SAID DECISION HAS BE EN DISMISSED BY THE APEX COURT. THE LD. AR ADDED THAT WHEN FACTS ARE DISCLOS ED IN THE BALANCESHEET, NO PENALTY COULD BE LEVIED AS HELD IN GITANJALI GHATE VS. DCIT IN ITA NO.6560/MUM./2010 AND DCIT VS. TP ROYCHOWDHARY & CO . (P) LTD.,IN ITA NO.729/KOL./2010. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE DECISIONS REFERRED TO BY BOTH THE SIDES. AS IS APPARENT FROM THE AFORESAID FACTS,THE ASSESSMENTS FOR THE AYS 2006-07 & 2007-08 IN THIS CASE WERE COMPLETED UNDER THE NORMAL PROVISIONS OF THE A CT, WITH THE FOLLOWING DISALLOWANCES: ITA NOS.1908&1909/DEL/2012 17 S NO. NATURE OF DISALLOWANCE ASSESSMENT YEAR 2006-07 [IN ` ] ASSESSMENT YEAR 2007-08[IN ` ] 1 EXCESS CLAIM OF DEPRECIATION ON VEHICLES. 9,77,072 14,91,54,686 2. INTEREST ON LOANS TO SUBSIDIARIES 14,04,000 14,8 4,000 3. DISALLOWANCE U/S 14A OF THE ACT 5,00,05,000 9,19 ,32,000 8.1 BOOK PROFITS WERE DETERMINED U/S 115JB OF THE ACT WITH THE FOLLOWING ADDITIONS: S NO. NATURE OF DISALLOWANCE ASSESSMENT YEAR 2006-07 [IN ` ] ASSESSMENT YEAR 2007-08[IN ` ] 1. PROVISION OF DEFERRED TAX 16,65,00,000/- NIL 2. CORPORATE DIVIDEND TAX 2,52,00,000/- 1,85,00,00 0/- 3. AMOUNT TRANSFERRED TO SPECIAL RESERVE 9,80,00,000/- NIL 4. AMOUNT TRANSFERRED TO DEBT REDEMPTION RESERVE NIL 8,66,00,000/- 8.2 THOUGH THE AFORESAID DISALLOWANCES UNDER TH E NORMAL PROVISIONS WERE UPHELD BY THE LD. CIT(A), ITAT VIDE THEIR ORDER DAT ED 23.2.2012 RESTORED THE ISSUES TO THE FILE OF THE AO. THE ADDITIONS MADE IN TERMS OF PROVISIONS OF SEC. 115JB OF THE ACT WERE UPHELD BY THE LD. CIT(A) AND THE ITAT. ON RECEIPT OF ORDER OF THE LD. CIT(A),THE AO LEVIED PENALTY U/S 271(1)( C) OF THE ACT IN RESPECT OF DISALLOWANCE ON ACCOUNT OF EXCESS CLAIM OF DEPRECIA TION ON VEHICLES & INTEREST ON LOANS TO SUBSIDIARIES WHILE DETERMINING INCOME U NDER THE NORMAL PROVISIONS . AS ALREADY STATED, THOUGH THE LD. CIT(A) UPHELD THE SE DISALLOWANCES, THE ITAT RESTORED THE ISSUES IN RELATION THESE DISALLOWANCES TO THE FILE OF THE AO VIDE ORDER DATED 23.02.2012 IN I.T.A. NOS. 617 AND 618/DEL./20 10. SINCE THE DISALLOWANCES, FORMING THE BASIS FOR LEVY OF PENALTY, ITSELF HAV E BEEN SET ASIDE, PENALTY IMPOSED U/S 271(1)(C) OF THE ACT DOES NOT SURVIVE. HONBLE SUPREME COURT IN THE CASE OF K.C.BUILDERS VS. ACIT,265 ITR 562(SC) HELD THAT ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SE T ASIDE. WHERE AN ORDER OF ASSESSMENT OR REASSESSMENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE, HAS ITSELF BEEN FI NALLY SET ASIDE OR CANCELLED BY THE TRIBUNAL OR OTHERWISE, THE PENALTY CANNOT STAND BY ITA NOS.1908&1909/DEL/2012 18 ITSELF AND THE SAME IS LIABLE TO BE CANCELLED. HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. R.DALMIA,(1992)107 TAX ATION 107, HELD THAT NO PENALTY SURVIVES AFTER DELETION OF ADDITION S, FORMING THE BASIS FOR THE LEVY OF PENALTY. SIMILAR VIEW WAS TA KEN IN ADDL. COMMISSIONER OF INCOME-TAX V. BADRI KASHI PRASAD (1 993] 200 ITR 206 (ALL) AND PRABHAT OIL TRADERS V. INCOME-TAX OFF ICER (NO. 3) (1996) 218 ITR (A.T.) 39 (ITAT, AHMEDABAD),CITY DRY FISH COMPANY V. COMMISSIONER OF INCOME-TAX (1999) 238 ITR 63 (A. P.) , CIT VS. MOHD. BUX SOKAT ALI (2004) 265 ITR 326 (RAJ)AND ACI T VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM).AS ALSO IN JCIT VS. M/S GHAZIABAD URBAN CO-OPERATIVE BANK LTD. IN ITA NO.3992/DEL./20 11 . 8.21 SINCE THE VERY BASIS UPON WHICH THE PENALTY HAS BEEN IMPOSED ON THE AMOUNT DISALLOWED ON ACCOUNT OF EXC ESS CLAIM OF DEPRECIATION AND INTEREST ON LOAN TO SUBSIDIARIES, DOES NOT EXIST IN VIEW OF THE AFORESAID ORDER DATED 23-2-2012 OF THE ITAT IN QUANTUM APPEAL , WE ARE OF THE OPINION THAT PENALT Y LEVIED IN RELATION TO THE SAID AMOUNT DOES NOT SURVIVE. THE OTHER ARGUMENTS MADE BY THE LD. AR ON THE ISSUE OF LEVY OF PENALTY IN RELATION TO THESE DISALLOWANCES, CONSEQUENTLY BECOME REDUNDANT AND INFRUCTUOUS. 9. AS REGARDS ADDITIONS IN TERMS OF PROVISIONS OF SEC. 115JB OF THE ACT, THE ISSUES IN QUANTUM APPEAL HAVE BEEN ADMITTED FOR ADJUDICATION BY THE HONBLE HIGH COURT VIDE THEIR ORDER DATED 29 TH AUGUST, 2012 READ WITH ORDER DATED 6 TH NOVEMBER, 2012 IN I.T.A. NOS.371 & 372/2012 FOR THE AYS 2007-08 & 2006-07 RESPECTIVELY. IN THIS CONNECTION, THE LD. AR RELIED UPON DECISION DATED 5 TH OCTOBER, 2010 OF THE HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. LIQUID INVESTMENT AND TRADING COMPANY IN I.T.A. NO. 240/2009 WHEREIN IT WAS CONCLUDED AS UNDER:- ITA NOS.1908&1909/DEL/2012 19 BOTH THE CIT(A) AS WELL AS THE ITAT HAVE SET ASIDE THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( I)(C) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE ISSUE OF DEDUCTION UNDER SECTION 14A OF THE ACT WAS A DEBATABLE ISSUE. WE MAY ALSO NOTE THAT AGAINST THE QUANTUM ASSESSMENT WHEREUNDER DEDUCTION UNDER SECTION 14A OF THE ACT WAS PRESCRIBED TO THE ASSESSEE , THE ASSESSEE HAS PREFERRED AN APPEAL IN THIS COURT UNDE R SECTION 260A OF THE ACT WHICH HAS ALSO BEEN ADMITTED AND SU BSTANTIAL QUESTION OF LAW FRAMED. THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. FOR THESE REASONS, WE ARE OF THE OPINION THAT NO QUESTION OF LAW ARISES IN THE PRESENT CASE. THIS APPEAL IS ACCORDINGLY DISMISSED. 9.1 SIMILAR VIEW HAS BEEN TAKEN IN THE DECISIONS O F THE TRIBUNAL, DELHI BENCH IN THE CASE OF HERO HONDA MOTORS LTD.,63 DTR 53; CHENN AI 'A' BENCH IN THE CASE OF SUNDARAM NON CONVENTIONAL ENERGY SYSTEMS LTD. IN IT A NOS. 1706 & 1707/MDS/2011; MUMBAI 'B' BENCH IN THE CASE OF M/S. NAYAN BUILDERS & DEVELOPERS PVT. LTD. V. ITO IN ITA NO. 2379/MDS/200 9 AND A THIRD MEMBER DECISION OF AHMEDABAD BENCH IN THE CASE OF RUPAM ME RCANTILE V. DCIT,91 ITD 237. IT HAS BEEN LAID DOWN IN THESE DECISIONS THAT WHEN THE DISPUTE BETWEEN THE REVENUE AND THE ASSESSEE IS ON A LEGAL ISSUE AND QU ESTION OF LAW IS ADMITTED BY THE HON'BLE HIGH COURTS, THEN THERE CANNOT BE AN AL LEGATION OF FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT AND, THEREFO RE, NORMALLY IN SUCH CASES PENALTY CANNOT BE JUSTIFIED. A PLEA OR CLAIM WHICH IS HELD BY THE HON'BLE HIGH COURT TO GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW , CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE SO AS TO ATTRACT LEVY OF PEN ALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, AS HELD BY THE THIRD MEMBER IN THE AFORESAID DECISION RUPAM MERCANTILE (SUPRA).IN THE LIGHT OF VIEW TAKEN IN THESE DECISIONS,ESPECIALLY WHEN THE REVENUE HAVE NOT BROUGHT TO OUR NOTICE AN Y CONTRARY DECISION, WE ARE OF THE OPINION THAT PENALTY LEVIED IN RELATION TO A DDITIONS IN TERMS OF PROVISIONS OF SEC. 115JB OF THE ACT, DOES NOT SURVIVE.. 10. EVEN OTHERWISE HON'BLE SUPREME COURT IN THE CAS E OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD.,322 ITR 158(SC) HELD THAT W HERE NO INFORMATION GIVEN IN ITA NOS.1908&1909/DEL/2012 20 THE RETURN IS FOUND TO BE INCORRECT AND WHERE AN AS SESSEE HAS MADE ONLY INCORRECT CLAIM, IT DOES NOT AMOUNT TO FURNISHING I NACCURATE PARTICULARS. WE ARE OF THE OPINION THAT A MERE REJECTION OF A LEGAL CLAIM DOES NOT GIVE RISE TO CONCEALMENT OF INCOME. [BURMAH SHELL OIL STORAGE & DISTRIBUTING CO. OF INDIA LTD. V. ITO [1978] 112 ITR 592 (CAL)]. A MERE REJECTION OF THE CLAIM OF THE ASSESS EE BY RELYING ON DIFFERENT INTERPRETATIONS DOES NOT AMOUN T TO CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS THEREOF BY THE ASSESSEE. WHEN TWO VIEWS, ARE POSSIBLE, NO PENALTY CAN BE IMP OSED IS A PRINCIPLE THAT HAS BEEN ENUNCIATED IN THE DECISION IN THE CASE OF CI T V. P.K. NARAYANAN [1999] 238 ITR 905 (KER) AND CIT VS. HMA UDYOG P. LTD., 21 1 CTR 543 (DEL). 11. MOREOVER, IN THESE TWO ASSESSMENT YEARS, BOOK P ROFITS ALONE HAVE BEEN ASSESSED AS INCOME. HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT V. NALWA SONS INVESTMENTS LTD. [201 0] 327 ITR 543 (DELHI) HAVE HELD THAT IF TAX IS PAID ON THE INCOME ASSESSED U/S 115JB OF THE ACT, CONCEALMENT OF INCOME HAD NO ROLE TO PLAY AND IS TOTALLY IRRELEVANT. SLP AGAINST THIS DECISION HAS BEEN DISMISSED ON 4.5.2012 BY HONBLE APEX COURT IN CIT V. NALWA SONS INVESTMENTS LTD, SLP NO.18564/2011 12. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING TH E AFORESAID CONCLUSION OF THE LD. CIT(A) IN THESE APPEALS, SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INC LINED TO INTERFERE. THEREFORE, GROUND NO. 1 IN THESE TWO APPEALS IS DI SMISSED 13. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERM OF RESIDUARY GROUND NO.2 IN THESE APPEALS, ACCORDINGLY THIS GROUND IS DISMISSED. 14. NO OTHER PLEA OR ARGUMENTS HAVE BEEN RAISED BEFORE US. ITA NOS.1908&1909/DEL/2012 21 15. IN THE RESULT, BOTH THESE APPEALS ARE DISMI SSED. SD/- SD/- (C.M. GARG) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. A.C.I.T., CIRCLE-9(1), ROOM NO.163, C.R. BUILDIN G, NEW DELHI 3. CIT CONCERNED 4. CIT(A)-XI, NEW DELHI 5. DR, ITAT, G BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT